The Federation of Indian Chambers of Commerce & Industry (FICCI) has asked the government to raise the import duty on all steel products to 25% in the upcoming Budget, as demand has slowed down in China, the world's largest steel producer and consumer.
With demand slowing down in this country, it is dumping steel products in India at cheaper prices, the industry body said.
"The import duty on all steel products should be raised to 25% in the Union Budget, 2016-17. As an interim measure, we suggest that the customs duty on all steel products be immediately increased to 15%," the industry body said.
It said the tariffs on both long and flat products need to be increased to provide a level playing field to the domestic industry, which has been severely hit due to rising imports.
Customs duty on import of steel long products is 10% and on flat products is 12.5%.
In the Budget for 2015-16, the government had increased the tariff rate on steel products (long and flat products) to 15%; however, the duties are still only 10% on long products and 12.5% on flat products.
During 2015-16, after numerous representations and meetings, the Ministry of Finance gradually increased the import duties to their current levels. However, both the interim measure and Union Budget 2016-17 request are under the consideration of the Ministry of Finance.
During April-August, India imported 4.5 million tons of steel compared to 2.9 million tons during April-August, 2014, registering a massive growth of 51%.
The country's steel industry is operating at around 80% capacity utilisation, impacted by imports from countries like Japan and Korea with which India has signed free trade agreements (FTAs).
"FTAs have not benefited domestic steel producers; they have rather proved to be detrimental. Thus, in future, any FTA or CEPA (comprehensive economic partnership agreement) including RCEP (regional comprehensive economic partnership) should exclude steel products from its ambit," FICCI said.
Noting that FTAs have resulted in huge imports of steel into the country, increasing from 5.4 mt in 2013-14 to 9.3 mt in 2014-15, the chamber pointed out that Japan and Korea together constituted 35% of total imports and if China is added, it is 71% of total imports during 2014-15.
"There is a definite case of reviewing the inclusion of steel in FTAs with Japan & Korea," FICCI said, adding that China, Japan, Korea are all steel surplus countries while India is a growing market so India needs to be wary of surplus gushing into the country.
The recommendations, submitted by the industry chamber to the finance ministry and Department of Industrial Policy and Promotion recently, are part of a paper titled “Executive Actions to enable Make in India”.